- lack of any significant easing in rates themselves (except for consumer credit), and
- lack of any uptick in credit issuance (in fact, there has been contraction in lending volumes in 3 out of 4 categories examined)
- creating Nama
- pumping countless billions into IRL-6 zombies
- setting aside specially designated funds within AIB & BofI for small business lending, and
- increasing various seed programmes (EI) and targeted tax reliefs
Top line numbers for loans under €1 million are:
- Average rates charged on loans under €1 million in volume with up to 1 year fixed duration (or floating) has risen from 4.27% t0 4.74% between March 2011 and April 2011. The rate now stands just-shy of 4.906% historical average and 4.801 average for crisis period of January-2008 through present. 12mo MA is now below April 2011 rate at 4.087%. Volatility of these rates has risen from 1.002 standard deviation for historical period to 1.302 standard deviation for the crisis period. In short, there are no signs of any improvement in the rates charged during the crisis.
- At the same time, volume of non-financial corporate loans under €1 million with floating or up to 1 year fixed rates has fallen from €404 million in March to €250 million in April 2011. Volumes of new loans written in this category now stand well below historical monthly average of €919 million, crisis period average of €832 million and 12mo MA of €448.4 million.
- Fixed-rate loans (with rate fixed for more than 1 year) also became more expensive in April (6.17%) than in March (5.86%). These are now well above the historical average rates of 5.234%, the crisis average of 5.329% and the 12mo MA of 5.008%. Volatility of these rates also rose during the crisis.
- Volumes of over 1 year fixed smaller loans has shrunk to €45 million in April, down from €64 million in March and down on historical average of €160 million, crisis period average of €110 million and 12mo MA of €70.25 million.
So to sum this up, small businesses are seeing higher charges and shrinking volumes of loans across both types of loans under €1 million in volume. Anyone wondering why the hell all the above measures are failing to deliver on the promise?
But wait, what about larger loans? Next, consider loans issued to non-financial corporations that are over €1 million in volume:
- Rates charged on loans of €1 million and more that are floating or under 1 year fixed have fallen from 3.51% in March to 3.22% in April and are now standing well below 4.407% historical average, 4.01% crisis period average, but above 12mo MA of 3.048%. Volatility of these loans rates have risen during the crisis from historical 1.159 standard deviation to a standard deviation of 1.518 during the crisis.
- So more of those loans should be pursued by businesses, you'd think? Not really. At least not when it comes to actual issuance of these loans. Volume of larger loans issued on floating or fixed up to 1 year rate basis has fallen in April to €626 million, down from €1,119 million in March. Both numbers pale in comparison with historical average of €3,948 million and crisis period average of €4,654 million and both are below 12mo MA of €1,784 million.
- Rates charged on loans of €1 million and more in volume with fixed interest rate over 1 year have also declined from 2.30% in March to 2.27% in April. The rates are now well below 4.054% average over historical period and 3.666% average over crisis period. 12mo MA is also higher than the current rates - at 2.772%. Lower rates here again come with higher volatility.
- Volumes of these loans, however, fell precipitously, reaching €45 million in April, down from €169 million in March. Historical monthly average of new loans of this type issued stands at €632.3 million, while crisis period average is €488.5 million and 12mo MA is €190 million.
Lastly, let's take a look at the spreads between the rates based on loan volume:
- Spreads on corporate loans under €1 million, flexible rate & under 1 year fixed over and above those for over €1 million, should - in theory - be negative, unless there is a selection bias of SMEs predominantly taking smaller loans. At any rate, we would expect the spread to be moving in the direction of lower spreads if Government 'get credit flowing to SMEs' policies were working. Alas, in April 2011, the spread stood at 1.52pp up from March 0.76 percentage points and well above the historical average of 0.499pp and crisis period average of 0.791pp. It was also above 12mo MA reading of 1.039pp. Spread volatility has declined marginally during the crisis. So no, Government policy does not help selecting in favor of smaller corporate borrowers and does not provide support for working capital lending.
- Spreads on corporate loans under €1 million with fixed rate (>1 year duration) over and above similar loans of volume in excess of €1 million stood at 3.9pp in April up from 3.56pp in March. The spread is now massively above historical average of 1.180pp and crisis period average of 1.663pp, as well as 12mo MA of 2.237pp. Spread volatility has risen during the crisis. Again, no evidence here that SMEs are getting any support from Government policy 'instruments' listed above when it comes to gaining smaller loans as opposed to larger corporates access to credit.